In its judgment 15465 of 3 June 2021, the Employment Chambers of the Court of Cassation ruled once again on the peculiarities of dismissal for just cause imposed on an employee carrying out other work during sick leave.
In particular, a disciplinary dismissal was ordered against a civil servant who, following a personal accident and producing medical certificates relating to an alleged depressive anxiety syndrome, was granted a period of sick leave during which, however, he was filmed by a detective agency while working for his daughter’s business, thus demonstrating that he had no physical or psychological disorder.
Following the employee’s appeal against his dismissal, it was found out during the first instance proceedings that the work carried out thereby for the other business was not occasional, rather it was ongoing and characterised by an involvement that was no less demanding than that required for the performance of his duties as a white-collar employee for the State Property Agency. On appeal, it was also found out that the medical certificates concerning the existence and nature of the disorders that had affected the employee since his personal accident were not consistent with each other. Therefore, the Court of Appeal held that the employee had no depressive anxiety syndrome and that, even if it existed latently, there was no nexus with his personal accident.
The Court of First Instance and the Territorial Court thus rejected the employee’s appeal, holding that his dismissal was lawful. The employee thus brought an appeal before the Court of Cassation, arguing, firstly, that the judgment on the merits had failed to establish the ‘non-occasional’ nature of his alleged work activity and, secondly, that the applicable collective agreement had been infringed since it provided for suspension from work with no pay, for up to 10 days, where “other activities are carried out during the state of illness or injury that are incompatible with and prejudicial to recovery”.
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The Court of Cassation, in ruling no. 12932/2021, reiterated that the waiver of notice period by the employee and the related substitute allowance, formalised by a settlement agreement made after the notice of dismissal, does not affect the obligation to pay social security contributions to INPS.
In this case, a bank, after having dismissed approximately 90 executives, signed a settlement agreement with them in which it was agreed to change the dismissal title from dismissal to consensual termination, with a simultaneous waiver by the executives of their notice period and related substitute allowance. Despite the agreement reached between the parties, the social security institution took legal action against the company claiming payment of social security contributions on the notice period substitute allowance.
The local Court of Appeal, reforming the decision of the first instance, upheld INPS’s claims, noting that the employment relationship was terminated with effect from the receipt of the letter of dismissal in which, instead of serving the notice period, the executives were paid the notice period substitute allowance. The substitute allowance constituted an element of remuneration that had already become part of the executives’ assets, and as such was subject to an obligation to pay contributions.
On this point, the Court of Appeal considered it irrelevant that a settlement agreement had been reached between the parties whereby each executive, a few weeks after the notice of dismissal, had waived the notice period and related substitute allowance.
Objecting to the court’s ruling, the losing company appealed to the Court of Cassation.
The Court of Cassation reiterated, as a preliminary point, that the obligation to pay contributions:
According to the Court of Cassation, the fact that the notice period substitute allowance is subject to social security contributions follows from its nature as remuneration. Therefore, “it is at the moment in which the dismissal becomes effective that the employee’s right to the notice period substitute allowance arises and the consequent obligation to pay contributions: if the dismissed employee waives their right to the indemnity, such waiver cannot have any effect on the public obligation, which pre-exists at the time of the waiver and is regardless to it because the abdication comes from a party (the employee) other than the owner (INPS).”
In the Court of Cassation’s opinion, once the dismissal has been announced, the notice period substitute allowance – which falls within “everything that the worker is entitled to receive,” because of its intrinsic retributive value, is part of the autonomous and distinct insurance relationship which is completely irrespective of the disbursement and, to the defensive argument, if it is part of the worker’s assets.”
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According to the Court of Cassation, the employer and employee’s settlement agreement change the termination title from dismissal to consensual termination while waiving the notice period and the substitute allowance takes place after the employment termination. The obligation to pay contributions has already arisen in the insurance relationship, and the employer remains liable to pay INPS the contribution on the notice period substitute allowance.
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In cases of dismissal for justified objective reason, the Judge’s verification of the “manifest lack of the fact“ requirement underlying the dismissal, from which the possibility of employee reinstatement derives, must cover the technical, production and organisational needs stated by the Company, and the possibility of relocating the employee elsewhere within the company organisation.
In its order dated 4 May 2021, the Court of Rome concluded that, even if the objective reason for dismissal due to production reasons was under the employer’s free assessment, and the Judge unable to assess the company management criteria, it is up to the same Judge to check the effectiveness and non-speciousness of the company reorganisation.
The case before the Court concerned the dismissal for justified objective reason of an employee of a company specialising in physiotherapy services. The dismissal was due to financial reasons based on the reduction in turnover recorded by the employer company in the previous three years. In the letter of dismissal, the Company stated the need to carry out “a cost reduction through a company reorganisation which included the tasks carried out [by the employee], and that these would be carried out personally by the director and included in the new information and electronic systems”. The Company dismissed the employee as there was no possibility of assigning her to equivalent positions, as stated by the Company.
The employee challenged the dismissal because it was not based on an effective company reorganisation and that the Company had not complied with the repêchage obligation. She requested the assessment of the lack of the fact underlying the dismissal under art. 18 paragraphs 4 and 7 of the Workers’ Statute, punishable by reinstatement in the workplace plus 12 months’ salary as damages.
The Court held that the dismissal was unlawful. It referred to case law in which the objective reason for dismissal can be identified by a different distribution of tasks among employees for the more cost-effective and efficient management of the Company. This would mean the employee who performed the task exclusively was redundant (Court of Cassation ruling no. 19185/2016 and Court of Cassation ruling no. 29238/2017). The Court stated that it is not sufficient that the tasks formerly carried out by the dismissed employee are assigned to colleagues. The reorganisation must be the source of the dismissal rather than being an effect.
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The Court, with ruling 6495 of 9/3/2021, as per art. 30 of Law No. 300/1970, confirmed union body members have the right to paid time off for meetings. Use for other purposes can justify dismissal. According to the Court, the abstract relevance for punishing the worker’s conduct requires real verification of its seriousness and consideration as just cause for termination. The assessment of proportion is assigned to a judge. In this case, the manager’s dismissal for just cause was disproportionate based on analysis of the alleged conduct and preliminary investigation results. The manager was charged with being arbitrarily absent from work, having carried out activities unrelated to the reason for time off. However, the worker had not attended any meeting, but had conducted activity related to his job. Therefore, according to the Court, the judges had rightly overturned the manager’s dismissal considering his disputed conduct to be punishable with a conservative penalty.
The Court of Rome, in its ruling no. 3605 of 19 April, 2021, ruled on the application of the dismissal prohibition, provided for by art. 46 of the “Cure Italy” decree and confirmed by the emergency measures that followed, to executives. Contrary to the conclusions reached on 26 February, the Court ruled that “the literal wording of the regulation, together with the philosophy that supports it, did not allow executives to be included in the prohibition.”
To deal with a crisis, worsened by the consequences of the pandemic, a company, with a notice dated 29 April 2020, dismissed its Chief Operating Officer due to the position removal and redistribution of the functions assigned to him among other company managers.
The executive challenged the termination by objecting to its nullity due to violation of art. 46 of Decree Law 18/2020 (“Cure Italy Decree”) on the assumption that the prohibition of individual dismissal introduced by the emergency legislation should apply to executives and the dismissal illegitimacy.
In rejecting the appeal brought by the executive, the Court of Rome preliminarily noted that art. 46 of the “Cure Italy” Decree – and the subsequent emergency measures that extended the dismissal prohibition – expressly excluded the possibility of ordering dismissals for justified objective reasons under art. 3 of Italian Law no. 604/66)
However, based on the literal content of the regulation and the assumption that art. 3 of Law 604/66 does not apply to executives, based on the express provisions of the legislation (art. 10 L. 604/66) and by constant case-law orientation, the Court ruled out that executives can be included in the dismissal prohibition.
The Court found the “clear and evident symmetry” between the dismissal prohibition and the use of social shock absorbers, which has allowed companies to reduce labour costs in a generalised manner to cope with losses. This symmetry is confirmed by the possibility for employers to revoke dismissals already announced before the prohibition, introduced by art. 46 of the “Cure Italy” Decree in paragraph 1-bis. This applies if a request to access the redundancy fund was made simultaneously.
According to the Court, the combination “dismissal prohibition” and “use of social shock absorbers” cannot be applied to executives, as they cannot benefit from social shock absorbers while in office. An interpretation that would allow the inclusion of executives in the dismissal prohibition would be unconstitutional. It would leave the employer responsible for the costs of the managerial employment relationship even in the presence of a justified termination.
The Court held that it could not come to a different conclusion, not even because of the order from the same Court dated 26 February 2021. Under this order the prohibition would apply to executives because “according to a ‘constitutionally oriented interpretation’ the exclusion of executives from the prohibition is unclear, given the regulation is supposed to prevent general dismissal without any distinction.”
With this ruling, the Court disagreed with the reasoning contained in the 26 February order. Under this order, it would be unreasonable not to include executives in the prohibition because they are protected by the rules of collective dismissal. With this ruling, the Court declared the cases were different. This justifies a difference in approach and it cannot be a valid reason to apply the dismissal prohibition to the individual executive.
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The logical-juridical process that led the Court to exclude the extension of the dismissal prohibition to management personnel can be shared since it follows legal provisions and the entire emergency regulatory system’s reason.
However, the case law on the interpretation of the same regulatory source provided diametrically opposed solutions, resulting in uncertainty for companies about the outcomes and costs of any dismissal of senior figures.
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